If there is something that has characterized this year 2022, it is undoubtedly the return of tourism. For months, the demand for air travel has skyrocketed. Airlines, which had parked planes and cut flights early in the pandemic, are now working overtime to meet all that demand. And they are not getting it. Mainly because the main plane manufacturers, such as Airbus and Boeing, are not managing to deliver the planes on time, something that, on the one hand, limits the growth of the airlines and on the other, keeps fares high.
As runaway tourism has returned and China has now lifted its restrictions, an inescapable truth worries the airline industry: there is a shortage of planes.
Missing planes all over the world. For Boeing and Airbus, delivering the planes they have sold on time is now their number one problem. And meanwhile, airlines from all corners of the world are “hungry” waiting for hundreds of orders that will not arrive this year. Not the next. Nor the other. A bottleneck in the supply chain will keep those planes from being delivered for possibly a few years. It is estimated that there is such a backlog of orders (some 12,720 aircraft) that things could last until 2029.
In fact, Airbus already sees airlines reluctant to place new orders. And it is normal given the queue of more than 6,100 aircraft for the A320neo family that is pending and that would take eight years to complete. Meanwhile, Boeing, which has announced around 850 gross orders this year and is a competitor to Airbus, is working hard to speed up work at its factories. The good news? Employees in the sector probably won’t be laid off for a long time.
Why? Deliveries have been hampered by a weakened supply chain, particularly for engines, which has delayed delivery times for many airlines. Added to this are logistical problems that we have been dragging along since the pandemic and now a brutal energy crisis. In fact, Airbus abandoned its delivery target of 700 passenger planes this year citing rising energy costs, which will hit smaller energy-hungry producers such as those making castings and forgings.
So, as people fly again and airlines get back on track after years of hiatus, carriers are looking to upgrade aging fleets, from sourcing necessary components to addressing labor shortages.
How did we get here? Suppliers ramped up manufacturing during the 2010s, but then the Covid pandemic hit, forcing big production cuts. Many now have too little capital and too few workers to meet their customers’ demand for forgings, castings and machine parts, and inflation is also taking its toll.
You have to remember that the companies laid off workers two years ago and are now trying to hire and train new ones. Along with the shortage of trained pilots, there are many obstacles that make the situation even more difficult.
It could mean flying older planes. “As a last resort, we can see airlines extending ownership cycles,” explained Sunny Xi, director of the Oliver Wyman consultancy, in this Bloomberg report. Normally, airlines plan fleets in 12-year cycles. But given the current situation and recent restructurings, companies are extending the life of existing fleets and may do so again in the future.
Rate increase. All this means that the airfares that people have been complaining about for their high prices (and rightly so) in recent months are not going to change. And things could get worse with the reopening of China’s air border. And it is that it is not only the shortage of planes that creates this situation, it is all the factors, including the price of oil. The end result for the average tourist will be significantly higher rates, which will increase as business travel returns and people want to holiday abroad.
Image: Airbus